SDNY evidence withholding will undermine accusations against Samourai’s wallet

A letter submitted this morning by the defense of Samourai wallet developers Keonne Rodriguez and William Ronergan Hill revealed that the Southern District of New York (SDNY) had suppressed clear evidence in criminal cases.

According to the filing, the prosecution had consulted Fincen about the feasibility of bringing in unauthorized money transmission fees for non-mandatory services before the developer charged them.

“Mixers like Samourai, who own private keys and do not detain cryptocurrency, strongly suggest that Samourai is not acting as an MSB,” Finsen told prosecutors.

In internal communications, the prosecutor says it could lead to fees based on “functional controls” of the code, perhaps referring to Samourai’s control over the user interface and the coin join server of the Samourai wallet. Prosecutors said such arguments were “never addressed in the guidance,” and admitted that “that could be a difficult argument.”

Communication between Fincen and SDNY was revealed following the so-called Brady request, ordering the government to hand over evidence that could exonerate the accused developer.

The government will need to hand over the evidence exempted to the defense two weeks after filing the latest indictment. The later disclosure of such highly relevant material may mislead the courts, arguing that the letters have an impact on both the bail requirements imposed on the developer and the tendency of judges to refuse to file a motion for rejection.

The defense is currently seeking a hearing to determine potential remedies for SDNY’s actions, including the dismissal of the charges.

“It’s hard to imagine a clear example of “prosecutorial regulation” than what we have here,” said the defense, referring to the recent Blache memo. “The relevant regulators telling prosecutors that Samourai’s wallets are not gold senders have indicted the same general guidance that Rodriguez and Hill relied on to guide their actions, and prosecutors have stepped forward and run a money services business that is not exempt anyway.”

Fincen’s attitude towards non-lawful service providers shared with SDNY echoes 2019 guidance. This states that “cryptocurrency wallet providers will be classified as transmitters if the host is completely independent of their value (contractually mandated to access value only from the owner.”

Advocacy groups and legal scholars have long argued that the prosecution of Samourai wallet developers and the prosecution of tornado cash developers Roman Storm and Rome Semenov are clear violations of Finsen guidance.

Samourai’s Brady Request was successful, but a similar request was rejected last year to try to disclose to the government that it contains “materials that have not yet been produced from materials received from OFAC and Fincen (substantial communications with these agencies).

As Storm points out in X, he was arrested the same day he consulted the prosecutor of Samourai Wallet about the feasibility of unauthorized money transmission fees, making it seem that SDNY is even more aware of the spread of that charge throughout Storm’s prosecution.

“Fincen explicitly informed SDNY prosecutors that no remittance license is required for Samourai Wallet’s non-mandatory design, but the DOJ has indicted the developer. “The prosecutor exemplifies regulations through criminal prosecution, directly opposes the directions of the AG Blanche Deputy Bureau, and undermines the Trump administration’s crypto policy.”

“Brady Violation,” wrote JW Verret, an anti-money laundering expert, in X.

“The fact that the prosecutor attempted to withhold this information from the defense is a serious ethical violation and could lead to a case,” Verret told Bitcoin Magazine. “That’s if the DOJ doesn’t drop it all together, given that the main justice effectively ordered such cases to be removed.”

“Like we said,” writes Peter Van Valkenburgh of Conicenter in X.

“If they are not a remittance under Fincen’s guidance, the defense said in the letter.

This is a guest post by L0LA L33TZ. The opinions expressed are entirely unique and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.